Dubbed "iRadio" by the media, Apple said that iTunes Radio includes functionality for creating your own radio stations, allowing the user to stream directly from the Internet. It will also be built into iTunes on Mac and Windows Apple TV.

The service comes at a time when the market is already established, with new rivals like Spotify, and even Google and Amazon. Pandora, another well-established rival in the music streaming space, currently has 70 million active monthly listeners, despite only being available in the U.S., Australia and New Zealand.

With 600 million iOS-powered devices sold, Apple has the reach to grab a vastly untapped sector of this user base in advertising. While it may be a novel feature for the average consumer, from the business side of things, the iPhone and iPad maker could generate vast amounts of revenue off the back of its ad-supported platform.

It will launch as a free, ad-supported service. The radio will be ad-free for iTunes Match subscribers, which currently costs about $25 a year.

iTunes Radio will launch in the U.S. first and will be later rolled out to other countries pending licensing deals and agreements with music firms.